The Americas have two facessecaf

by V. Subramanian

The Americas

The changing trade in the Americas reveals recovering rice production in Brazil and a struggling crop in the U.S.
n 2010, the 4th The Rice Trader (TRT) Rice Americas Conference covered Brazils poor production caused by unexpected rains and floods in late 2009, an expected record crop in the U.S., and the effort of the Southern Common Market, or MERCOSUR region (Argentina, Brazil, Paraguay, and Uruguay in this report), to help Brazil meet its shortfallwhich meant giving up market share in key African and European rice markets. This year, however, it was the opposite. The 5th TRT Rice Americas conference in Panama revealed how the U.S. 2010 crop was eventually plagued with quality problems and how the current crop has been battered by floods around the Mississippi River and droughts in Texas in the Mid-South growing area. Several analysts predict the worst for the expected U.S. rice output. The anticipated drop in yields caused
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by bad weather was aggravated by a decrease in rice area. Several farms also decided to move away from rice to plant soybeans, maize, and cotton. With these events, the TRT conference this year was not short of excitement. Delegates described quality problems seen from the imported American rice, with U.S. rice production expected to be lower, while South American production hit record highs, which could make up for the shortfall in the U.S.

Widespread risks

Conference Chairman and TRT President/CEO Jeremy Zwinger started the ball rolling with an explicit look at the risks, specifically the weather, currency, and the general state of the American and even European economies, and the well-documented turmoil that now grips the Middle East and North Africa.

Risk has gotten more widespread, claimed Mr. Zwinger, with rice trading no longer just about buying and selling rice. He said that buyers, sellers, and the broader rice supply chain are expected to face new challenges from increased risks that look set to keep global rice markets on edge. Although a good supply is available in 2011, Mr. Zwinger cited factors such as high oil prices, increasing wheat and maize prices, and a more volatile global food balance that will have an impact on rice markets. Comparing wheat, maize, and rice prices over the last 8 years, rice prices are relatively cheaper today than during the 2006-07 market years, which suggest a market imbalance that should result in lower wheat and maize prices or a higher price for rice. Moreover, Mr. Zwinger noted that some analysts predicted a 40% reduction in the U.S. crop in 2011 because of the erratic weather in the country. Weather anomalies hit both the southern rice-growing regions and California rice belt.

Odd weather

Dr. s. Elwyn Taylor

Mr. JErEMy Zwinger

Mr. Nicolas rubio

Still on the subject of the weather, Elwyn Taylor, an extension agronomist from the Climatology and Meteorology Department of Iowa State University, revealed extensive studies on global weather patterns over a period of more than 100 years. Dr. Taylor suggested that the frequency and intensity of weather anomalies appear to be on the rise. Needless to say, crop output would be more difficult to predict in the future. He did, however, suggest that some quick tweaks to the way analysts combine

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Rice Today July-September 2011

Mr. ZwiNgEr (far right) and Mr. V. subramanian (middle) with delegates from the colegio de ingenieros agrnomos de Panam.

oVEr 350 delegates from various countries attended the TrT rice americas 2011.

weather developments with crop analysis could also yield more accurate forecasts that could aid planning.

Brazils crop recovery

Tiago Sarmento Barata, a rice market analyst at Agrotendncias Consulting in Agribusiness, highlighted a record crop in Brazil. In stark contrast with its 11.6-million-ton production last year, which represented an 8.3% drop compared with that of 2009 (see Pressure in the South on page 17 of Rice Today Vol. 9, No. 3), this year Brazil produced 23.3% or 2.3 million tons more than in 2010. With 13.9 million tons (milled equivalent), the countrys production even surpassed its domestic consumption of about 12.5 million tons (milled equivalent). More interestingly, Mr. Barata revealed that, as a whole, the MERCOSUR bloc produced a total of 17.64 million tons, which more than cover the regions consumption of 14.31 million tons. MERCOSUR is then left with an exportable surplus of 3.33 million tons. Quite significantly, in 2011, Argentina and Uruguay will have a lesser role to play as suppliers to Brazil. This suggests that the region will have more rice to export to Africa, Europe, and within the Americas. However, Mr. Barata pointed out that exports will face restrictions in terms of logistical limitations, especially since Brazil will also compete for shipping capacity with its own lucrative soybean exports. Looking forward to 2012, Mr. Barata projected that Brazils production would fall by 10% because of the high costs of rice production. He further explained that the high cost and need for subsidies to support farmers and export programs

would limit production growth in the future, in favor of other more profitable crops such as soybeans. To this effect, the excess rice available for exports from the MERCOSUR region will likely see a record export year in 2011, with more exports expected to reach Africa, the Middle East, Europe, and several markets in the Americas, which will have a South American supply option to consider at a time when the U.S. market looks plagued with quality and supply problems that could carry over to 2012 production.

in terms of their acceptability in the market and price. Several buyers revealed that the higher-than-usual chalkiness seen in U.S. rice exports, and other quality issues, have created some reluctance in accepting U.S. rice.

Volatility ahead

The struggling U.S. crop

Nicolas Rubio, an international economist of the Foreign Agricultural Service of the United States Department of Agriculture, pointed out that the U.S. had a record production in 2010, but it suffered from quality and disease problems, thus resulting in a nearrecord-low milling rate. Consequently, demand for U.S. rice weakened, leaving the country with an ending stock of 1.75 million tons (milled basis)the highest since 1986. The 2011 production has not fared any better as weather-related damage and some shift in area away from rice in favor of other crops have resulted in an estimated 22% drop in production compared with 2010. Supplies, however, are expected to remain unchanged, as the carryover from 2010 production helps offset the drop in 2011 production. Although Mr. Rubio suggested an estimated 3.4 million tons of rice exports in 2011, several delegates questioned the production estimate, noting that some analysts projected a 3540% decline in production. The low quality of the carryover stocks was also challenged
Rice Today July-September 2011

To sum up, the U.S. saw a fall in production, from a record 2010 crop to a smaller 2011 crop. Now, it faces more challenges, as the quality issues have dented U.S. rices export potential. Meanwhile, MERCOSURs 3.3 million tons of export availability looks likely to not only affect Asian sales to Africa but also attract buyers from the Americas to consider the South American option, which many have said to be of very good qualitycertainly in comparison with U.S. rice. The issues debated at the conference revealed global rice productions susceptibility to weather-related impacts. Although the rice supply, for the moment, looks good, the increased risk in commercial markets, a tightening global cereals market, and the fact that the lowest grade of rice (from Myanmar) trades at a $100-per-ton premium compared to 2010 suggest a global rice market that could quite easily struggle against volatility. In the near term, the two most important events that are expected to shape the trends in the market are Indias decision whether to lift the ban on nonbasmati rice exports or not (expected after the monsoon season is over and once crop output for 2011 is better known) and Thailands rice policy, which is expected to change depending on the results of the national elections on 3 July.
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The Americas
the rice trader cOUrteSY OF irGa

A look at U.S. rice production

espite the record crop in the United States in 2010, the very hot summer last year caused quality and disease problems that hit U.S. production hard. This resulted in near-record-low milling rates, weaker demand for rough rice from some Central American markets, record sales of brokens to sub-Saharan African markets, and the highest U.S. ending stocks since 1986, most of which are longgrain rice. Regarding 2011-12 production, as of 9 June, the United States Department of Agriculture (USDA) projected that rice area would be smaller at 1.28 million hectares because of the floods in the Mississippi River Delta and shifts away from rice to grow more profitable crops this year. Arkansas and Missouri account for most of the decline in area, mainly in long-grain rice production. With rice yields estimated at 7.89 tons per hectare, the USDA forecast a rough production of 9.05 million tons, which is about 22% lower than that of 2010-11.

by Nicolas Rubio

ErraTic wEaThEr troubles U.s. production.

However, in spite of the drop in production, the level of U.S. supplies is almost unchanged. The current volume is the second-largest on record. The large carryover stocks in 2011-12 will offset the lower production. Quite significantly, U.S. rice consumption is virtually flat. As a result, exports are extremely important. Close to 60% of U.S. exports go to Mexico,

Canada, Haiti, Central America, and Japan. Except for Japan, these are all long-grain markets and they will continue to be important to the U.S. The countrys rice industry is also trying to expand its market share in places such as Venezuela and other markets in South America. Exports are forecast to be 3.4 million tons (milled basis), slightly lower than in 2010-11.

The little giant

by Tiago Sarmento Barata

or the past 3 years, the Southern Common Market, or MERCOSUR region (Argentina, Brazil, Paraguay, and Uruguay), has caught much of the global markets attention. The 19.8% increase in the regions production, its expanding share in the international rice market, and its highly valued quality rice have made it recognized as a major player in the global market. Many non-MERCOSUR rice players regard the region as a little giant. The region is considered a competitive alternative supplier of excellent-quality rice. MERCOSUR has a great potential in improving significantly its production capacity because it still has huge areas of land available and an abundant supply of water. However, rice production is limited by other crops grown on large

areas such as soybeans, maize, cotton, and sugar cane because these crops are more profitable. Notably, the relationship among the MERCOSUR countries has changed over the past years. In 2010, when the rice produced in Brazil was not enough to meet its domestic demand, it was quite natural for Uruguay and Argentina to fill the gap. It could be said that there was a synergy within the bloc: Brazil absorbedin a much adjusted manner the surpluses of the neighboring countries. However, things have now changed. In the past 5 years, Brazils rice crop soared by 15.4%, while consumption fell by 2.8%. The country achieved self-sufficiency and surpluses began to accumulate. Consequently, prices in the domestic market plummeted and Brazil was no longer
Rice Today July-September 2011

an attractive market for Uruguay and Argentina. Meanwhile, Paraguay is building its production capacity. Five years ago, it produced very little rice. But, now, it harvests approximately 270,000 tons (milled rice) of excellent quality. In light of this, exports to countries outside the bloc have become an obsession among MERCOSUR traders. In 2011, their total exports are projected to reach 2.3 million tons (milled rice). The sales of Brazil are expected to reach 680,000 tons, which involves increasing parboiled rice shipments to Africa and higher sales to Central America, other countries in South America, and Europe. Meanwhile, Uruguay and Argentina are estimated to export 850,000 tons and 816,000 tons, respectively, mainly to the Middle East, other countries in South America, Central America, Europe, and Africa.

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